What are the different forms of incorporation in the US?

Description

Eric Save, Partner at K&L Gates LLP explains two types of incorporations in the US as the most common ones for a foreign founder.

Video Transcript

What are the different forms of incorporation in the US?

Companies coming from abroad or founders that are coming from abroad, there are really only two types of entities here in the US that is probably going to make sense for you, which are the corporation and the limited liability company. There are other types of entities, there are partnerships, for example, of different types of general partnerships, limited partnerships, and there’s a special type of corporation, called an S corp and another type of corporation called a close corporation.

When you have foreign investors, when you’re a company from abroad, what probably is going to make the most sense for you is to incorporate either a corporation or to form a limited liability company. Just very briefly about what the differences between those two entities. So, the big difference has to do with how these entities are taxed and also sort of the formalities surrounding, you know, setting up one of these entities, and administrating these entities.

A corporation is a bit more formal so there are more formalities surrounding its incorporation and also the way that you administer it going forward. So you have to have a board of directors, you have to have certain officers, president, secretary-treasurer, and there’s more formalities that are required in order to maintain that corporate form and to make sure that, you know, creditors, other third parties won’t be able to challenge that corporate form and say that: “no, you’re not really an entity, it’s just the shareholders and they just set up this entity as a shell.” So as a corporation there’s more formality there.